The usefulness of equity analysts’ buy, hold and sell signals have been cast into doubt by research from platform A.J Bell.

The ten least popular stocks in the FTSE 350 – those with the greatest number of ‘sell’ ratings from analysts – beat the most popular ones and the index hands down in 2016.

The debate over just how much value is added by broker research is even more sensitive than usual at the moment, as fund managers assess how much or whether to pay for research amid a regulatory drive toward greater transparency on fees within the industry.

The cost of this research is routinely passed on to retail fund investors over and above the annual charge they pay for a fund – estimated at £1.5 billion in 2012 by the UK’s watchdog the Financial Conduct Authority.

AJ Bell has analysed the FTSE 350 (excluding investment trusts) and the number of broker buy, hold and sell recommendations per stock at the start of 2016 and how the most and least popular companies did across the year. The results make for sombre reading for those investment banks and brokerages looking to justify hefty fees for access to their analysis.

The ten most popular stocks – where all analysts covering them were uniformly positive – managed just a 2.1% capital return between them, compared to a 12.5% increase in the FTSE 350 index.

Five of the ten most popular names did generate gains, including 84% from the most popular stock of all, but five fell by between 16% and 37% to erode these gains.

The ten least popular stocks – those with the greatest number of ‘sell’ ratings from analysts – beat the most popular ones and the index hands down in 2016.

Even though 44% of coverage featured a ‘sell’ rating the ten names generated an average capital gain of 56.2%, compared to the FTSE 350’s 12.5% advance and the 2.9% return offered by the ten stocks where coverage was most bullish.

Only three of the ten least popular stocks fell in value, two more than doubled and four rose by more than 50%.

Russ Mould, AJ Bell investment director, says: “Perhaps the greatest lesson from these figures is that they back up Jim Rogers’ assertion that ‘The more certain something is, the less likely it is to be profitable’ as buying the stocks where bullish conviction was strongest and avoiding or selling the ones where bearish conviction was strongest would have been a quick road to the poorhouse in 2016.

“Looking at the bare data cynics would say the analyst research has little or no value at all– other than perhaps giving a steer that investors should do the opposite – and it is unlikely that the broking industry will be able to sustain an average of 13 analyst ratings per stock over the medium term, given the costs involved.

“From a retail investor’s perspective, this shows the importance of doing your own research and not blindly relying on the consensus views of the ‘experts’. If you don’t understand the business, aren’t sure the company has pricing power, don’t trust the management or fear the shares are expensive, you may need to think again.”

“The 2016 figures raise the question of which stocks had the highest percentage of ‘buy’ and ‘sell’ ratings as we head deeper into 2017.

“January’s performance data looks more promising for the analysts, as the ten most popular selections by percentage of buy ratings are outperforming both the FTSE 350 and the ten stocks with the greatest percentage of ‘sell’ ratings. However, it is early days and we shall follow these 20 names with particular interest for the rest of the year.”